Tax Plan Shifts Burden Unfairly

November 17, 2017

In the past two weeks, Republicans in both the House of Representatives and the Senate released their respective proposals to overhaul the United States’ tax code. The versions have minor differences but are similar in advocating for the same goal: lowering tax rates for corporations and the wealthiest Americans. In their current forms, the bills would cut the corporate tax rate by 15 percent and give individuals making between $400,000 and $1 million a large tax reduction as well. Gary Cohn, an economic adviser to the administration of President Donald Trump, said that “big CEOs” are the group most excited for the Republican tax plan.

Each plan is also similar in that it shifts the tax burden from businesses and wealthy individuals to higher education, with graduate students and university endowments facing tax increases. This editorial board finds the tax proposals to be unfair and misplaced and believes that they show just how far their creators are willing to go in order to lower taxes on the wealthiest in our society. The endowment tax and elimination of the graduate student exemption are symptoms of the overarching issues with the tax plan, which shifts the tax burden unnecessarily while lowering it on those who need it least.

The Republicans’ efforts to keep the bill deficit neutral in order to pass through reconciliation—and therefore only need 51 votes in the Senate—include two policy changes that would specifically affect universities across the country and their students. Both the House and Senate proposals as currently written plan to tax the investment income of endowments at some private universities. If implemented, the House’s tax reform bill would also repeal an exemption that currently prevents graduate students from paying taxes on educational stipends used to fund their educations.

These two provisions would have far-reaching and detrimental effects on higher education and are extremely unreasonable, given that they are being used simply to facilitate tax breaks for the wealthy.

The bills would levy a 1.4 percent tax on the investment gains of private universities with endowments worth at least $250,000 per full time student, which would mean that roughly 60 to 70 universities would be required to pay the tax. While taxing investment gains on endowments may be a proposal to consider in the future, it is not the right decision within the circumstances of the Republicans’ tax reform effort. Changing policy on endowments to ease financial responsibility for the wealthy is exceptionally ill-advised.

In addition to proposing the endowment tax, suggesting the elimination of graduate student tax exemptions is another misguided attempt by Republicans to balance their corporate tax cuts by placing burdens on more vulnerable members of society. Counting aid money for graduate students as taxable income is not only nonsensical on the surface level, but also would have widespread effects on educational access and quality.

Removing the tax exemption on scholarships for graduate students would make these degrees more expensive overall, as the cost of entering graduate school compared to the workforce would rise with the heightened tax burden of advanced degrees. The changes in affordability would limit access for low-income students who are qualified to attain these degrees and make them available only to those who are able to afford the increase in taxes. Given the usually small stipends that graduate students receive, this would almost certainly mean that the already wealthy would still be able to receive these degrees, while some of their peers would not.

For students at Georgetown, two major repercussions of eliminating the graduate student tax exemption are clear. First, the change would obviously have massive effects on graduate students currently enrolled and any undergraduates who plan on pursuing advanced degrees in the future, limiting access to advanced degrees for students with less financial flexibility. Second, many undergraduate students enroll in classes either taught by graduate students or with graduate students working as teaching assistants. If accessing graduate degrees is more difficult for talented people with less financial means, the quality of teachers will fall, adversely affecting undergraduates taking these courses.

The Republican tax plan is a blatant attempt to balance a tax deduction for the wealthy by removing benefits from members of the middle and lower classes. The impact of the two plans on academia is dangerous to our student body, as both undergraduate and graduate students would be impacted if the proposal were to become law. Policymakers in Congress must reconsider their bills immediately and work towards a tax plan in which all members of society pay their fair share.

Editorial Board
The Editorial Board is the official opinion of the Georgetown Voice. Its current composition can be found on the masthead. The Board strives to publish critical analyses of events at both Georgetown and in the wider D.C. community. We welcome everyone from all backgrounds and experience levels to join us!

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